Monday, March 26, 2012

On the Andrew Marr programme on 23rd March 2012, the writer Max Hastings reported a conversation he had had with a ' senior central banker' recently in which he had been told that today, London is considered to be the money laundering capital of the world. Max Hastings was commenting on the recent shooting of a Russian banker in London, but his piece was all the more relevant not only because Russia is now said to be controlled by a 'gangster culture', but because of his report of the large number of Russian, so-called businessmen (among the 200,000 or so Russians now living in the UK), who have moved to this country to carry on their activities here. A lot of these people seem to carry their criminal baggage with them, but there appears to be an apparent disregard within Government for any concern that London may have become the leading business centre for the world's funny money.

How can we have got to this state of affairs, when, on paper, we have some of the strictest anti-money laundering legislation in the world? The answer, I believe, lies in the fact that despite our many laws and regulations, they have never been effectively enforced by the financial regulators, and the banks and financial institutions appear to know that as long as they continue to pay lip service to the rules, they will not be required to implement them too effectively.

Only this year has the FSA managed to bring a money laundering charge against a financier, and he is a very small fish indeed. In an insider trading case against Richard Anthony Joseph, it has added charges of money laundering. It has charged him with eight counts of insider dealing and two counts of money laundering.

The charges follow on from the arrest of Joseph on 19 May 2010. The interest in the case is not in the insider dealing, per se but in the addition of charges of money laundering. Although the FSA has had the power to prosecute this offence for some time, it has rarely, if ever, used it.

There is a world of difference between having rules which are meant to be obeyed, and doing everything within one's power to avoid providing any meaningful form of compliance with the rules. The purpose of the regulations is to make it as difficult as possible for people who have acquired their money illicitly, anywhere in the world, to find a safe haven in the international banking system. So there are rules and regulations which impose a burden on banks and financial institutions requiring them to ensure that before they accept money from a client, that they have a clear picture of its provenance, that they know as much as possible about their clients, their businesses, the sources of their funds, and if they have held high political office, to make sufficient enquiries to ensure that the monies being deposited are not in fact the proceeds of international aid payments which have been stolen from the country's Treasury.

These rules are routinely flouted by the financial institutions.

They will say that they have large compliance departments, with many staff dedicated to ensuring that such situations do not arise, and in many senses, they are telling the truth. The problem is that they are not telling the whole truth. In 2011, The Financial Services Authority conducted an investigation into London banks and found that three quarters of them were not doing enough to verify the sources of some customers’ wealth. This probe shed some light on a system that is failing to stop the flow of corrupt money, a problem that continues to have disastrous consequences for millions of people. Predictably, the regulator did not name the banks that had ignored the rules, nor gave any indication they would do so.

Again, predictably, the FSA failed to take any public action against any of these institutions for this egregious flouting of the rules. They could have brought prosecutions against them for failing to implement the relevant regulations, but they did not do so. This is so typical of the regulatory response to flagrant wrong-doing in our banking sector, and it is looked upon by the banks and their employees as a sign of immense weakness, which they feel able to exploit at every opportunity.

The compliance regime is undermined by the calibre and quality of people employed by the banks to implement the anti-money laundering regulations. Repeatedly, in discussions with recruitment consultants I am told that the kind of person being sought to fill a particular role is a 'low-level' employee with minimal length of service. They are looking for someone with a couple of years' experience who might be capable of filling a new position, but they don't want to pay any real money for anyone with any skills, real experience, or more importantly, the sense of independent knowledge to be able to stand up to the commercial people and say, 'you can't do that'!

You only have to look at the salary levels paid to compliance officers and then compare them to the salaries paid to traders and business getters, to see the huge discrepancies in functional importance the banks place on compliance. At a Group Compliance Director level, you may be seeing 6 figure salaries, but these are rare. The vast number of employees in this function are being paid peanuts compared to the business side of the organisation.

Another problem with the British mentality towards compliance is the over-emphasis on 'process' as compared with 'effective enforcement'. The compliance function is awash with processes and procedures, they have manuals full of them, but all they are doing is seeking to demonstrate to any regulator that if asked, they have a process to comply. Any process, which is not rigorously tested and then analysed by a skilled and experienced person is worthless. I once did a pre-Arrow review for a major global bank of their anti-money laundering function. They had processes and procedures written down in manuals, provided at vast expense by one of the Big 4 consultants. When I tested how the staff were applying these processes, I found a huge lacuna in their areas of knowledge. To make matters worse, they had no-one with any 'grey hair' sitting in the middle of the web, holding all the ends of the processes, in order to ensure that they were being effectively implemented.

If we have a regulatory agency who repeatedly refuses to enforce the anti-money laundering regulations, and is sufficiently inept to accept that the level of compliance being provided by the banks and other financial institutions can be performed using a 'tick box' mentality, then we have the answer to why London is now seen as the money laundering capital of the world.

This is so typical of the British attitude towards any kind of financial regulation. It is as if Governments of whichever persuasion, have swallowed the nostrum that if they are seen to be heavy-handed towards the banks, then this will in some way deprive the UK of some hidden special advantage. So, we have regulations which only get enforced at the margins, and which the major players ignore at whim. Yes, from time to time the regulators do seek to fine the banks for the worst examples of their egregious behaviour, but fining a bank is nothing more than an HP commitment as far as the bank is concerned. All it does is dilute their profitability which is reflected in even less tax being paid on their profits. If they are not named and shamed, as is routinely the case, then there is no reputational risk attached to the penalty either, so there is no stigma applied.

As with so many other areas of financial wrong-doing, it would appear that the banks have seen off the regulators yet again, and the only loser would appear to be the UK financial services' arena which is now, apparently, the venue of choice for every international crook's dirty money. We must prepare ourselves to witness more Russian-style assassination attempts on our streets, as the organised criminals who deposit their money with the even better organised criminals in the banking sector, continue to see London as the money laundry of choice!

Friday, March 09, 2012

The futile, pointless deaths of 6 young soldiers in Afghanistan forces us to address the reasons for our continued presence in that corrupt, rotten country, and to demand that our politicians face up to their responsibilities to their constituents, and start to take a positive lead in this debate, acknowledging the truth of the situation, and taking the necessary steps to bring our troops home immediately.

For years now, we have sat back while one after another, our young service people have lost their lives in a war, the reasons for which I doubt anyone understands any more. We have been given so many conflicting reasons for our troops being in Afghanistan; supporting the legitimate Afghan Government, making life safer for women and children, helping to build schools and social infrastructure, suppressing the drug trade, nation building, and now, fighting terrorism in Afghanistan in order to make our streets safer at home.

None of this has any reality, the people who committed terrorist atrocities in London on 7/7 were home-grown Jihadists, who were already known to the Security Services.

We went into Afghanistan to support the Americans. It was all part of Prime Minster Blair's sycophantic support for George Bush, and supported by the dwindling group of political Atlanticists in the UK Security Establishment who worry about not being allowed to nibble the intelligence crumbs that the Americans occasionally allow to drop from their high table.

The War in Afghanistan, also called the Afghan war, began on October 7, 2001, as the armed forces of the United States of America, the United Kingdom, Australia, and the Afghan United Front, the old Northern Alliance launched Operation Enduring Freedom.

The primary driver of the invasion was the September 11 attacks on the United States, with the stated goal of dismantling the A Queda terrorist organization and ending its use of Afghanistan as a base. The United States also said that it would remove the Taliban regime from power and create a viable democratic state. A decade into the war, the U.S. and the Allied forces continue to battle a widespread Taliban insurgency.

The politicians are agreed that the UK must keep in line with the Americans, our plan to leave is set for 2014, all the while we are ostensibly working to train and support the Afghan Armed Forces and Police. Why do we maintain this ridiculous fiction? The Afghan army and Afghan police are a rag-tag collection of some of the most corrupt individuals in the country, serving a corrupt Government in which a large number of Karzai's ministers are actively engaged in overseeing the drug trade, and all the while our young men are dying.

The saddest fact is that from the start, there was no coherent exit policy, and we have not been able to extricate ourselves from a war that is becoming increasingly more costly in terms of human lives and matériel.

Even if it were possible to put aside the immeasurable human cost in sorrow and grief such deaths cause to families and loved ones, and it must be an unbearable burden for them, we have taken our eyes off the bigger picture of the huge number, in excess of 5,000 British service personnel, who have returned home, alive, but in many cases, severely injured, both physically and mentally, and who should be deserving of financial and social support for the rest of their lives, albeit an incalculable sum of money. I say 'should' but it doesn't happen.

Experts have warned of a tidal wave of cases of mental trauma caused by service on the frontline by overworked soldiers, first in Iraq and now Afghanistan. Of those, around 5 per cent are likely to suffer from the more serious Post Traumatic Stress Disorder (PTSD), which can lead to alcoholism and depression and other problems. 'Combat Stress', the veterans’ mental health charity, has said that based on the MoD figures it would mean that 51,000 veterans were likely to show symptoms of mental health problems because of their service in Iraq and Afghanistan.

There are other less visible but still shocking social costs. Ex-servicemen make up about a quarter of homeless people in the UK. It seemes that most have been so used to the discipline of military life that when this was taken away they were left dazed and confused, bereft of any sense of belonging. Last week, it was revealed that there are nearly 2,500 ex-servicemen in prison. A survey published last November 2011 by the National Association of Probation Officers put the number even higher, suggesting that one in 10 prisoners has previously been in the Armed Forces. The study also found that domestic violence is by far the most common conviction, accounting for one in three cases, while other violent assaults account for around one in five.

Having witnessed the way that ex-servicemen's lives can unravel once they leave the Forces, it should surprise no one that some will find themselves in trouble with the law. There is a quagmire of despair and loneliness that many face when they come out of the Army. How many of them can be expected to cope in the real world if, from the age of 16 in a lot of cases, everything about their lives has been so rigidly controlled. They have been trained to obey orders and never question them. Their day-to-day lives have been controlled and provided for – in essence, they have been institutionalised.

These are the real costs to the UK from our absurd insistence of continuing to try and cling to a military memory of a once-great nation with an Empire to defend. At a time of real recession, these are costs we should not want to be escalating, the ones we have are bad enough.

Our presence in Afghanistan is no longer a defensible policy. We have already told the Taliban when we intend to leave, and for all the posturing of politicians, from both sides of the House, on 'Newsnight' and 'Question Time', the insurgents are merely biding their time. There may well be overtures being made to their leaders to come to a negotiating table, but any discussions will be futile.

The Taliban have denied reports that it would soon hold talks with Mr Karzai's government in Saudi Arabia to end the war.

"There is no truth in these published reports saying that the delegation of the Islamic Emirate would meet with representatives of the Karzai government in Saudi Arabia in the near future," said a statement on the Taliban website.

Afghan officials had suggested that talks in Saudi Arabia would be in addition to contacts in Qatar between the Taliban and the United States. But it was never clear whether the Taliban, which has resisted talks with the Afghan government, or the Saudis, who have made involvement conditional on the Taliban renouncing Al Qaeda, would come on board.

And the real problem does not even reside in Afghanistan, but in Pakistan, among the tribes of the autonomous tribal areas, where the Pakistani Intelligence Services continue to maintain their links to the Taliban, and wait for the day when the British and the Americans have left.

A leaked NATO report has provided further evidence that Pakistan's ISI security service has been helping the Taliban. The report states that the Taliban was increasingly confident of regaining power once US forces leave in 2014, and said Pakistan was positioning itself for that outcome.

Key points from the report, 'State of the Taliban' and published by the BBC state that;

For years the US has argued that Pakistan's ISI has been providing support to the Taliban in Afghanistan. It has also been pressuring Pakistan's government to do more to stop cross-border raids by the Taliban. Large swathes of Afghanistan have been handed back to Afghan security forces, but many Afghans doubt their security forces can maintain control once the foreign troops leave.

Next time you hear a politician telling you that we need to stay in Afghanistan because it is making our lives safer here at home, you will know he or she is lying. They lie, because they don't know what else to say, but is a lie all the same! And all the time, the coffins will continue to be repatriated.

Wednesday, March 07, 2012

I can't imagine I am the only one who has noticed the way in which spokespersons for the printed media, many of them anonymous, are beginning to issue statements critical of the way in which the police are conducting their investigations into the sleaze allegations against the Murdoch empire. Others are openly whingeing about the way the Leveson enquiry is getting closer and closer to some seriously unpalatable facts. I wonder who is driving this campaign.

What this enquiry is doing is lifting up some of the biggest rocks in the murky world of police-press relations, and allowing the public to get a look underneath at the grubby activities which have, apparently, been common currency among certain senior policemen and the hacks for many years.

We have been entertained to some horribly revealing evidence in recent days, as senior cop after cop has wilted in the spotlight of counsel's questions, while giving answers that simply beggar credulity. Former Met Commissioners, in turn, have given evidence in the case. Their information has done little to give any comfort to the people of London, indeed, the whole of the 5th floor at the Yard has been exposed as a nest of pompous, petty, spiteful, self-serving back-stabbers, who leaked like sieves to the Murdoch empire, when they weren't cosying up to their executives, or going out to expensive dinners with them at exclusive restaurants.

AS the Guardian observed, the most awful experience was watching Robert Jay QC for the Leveson inquiry '...questioning two former assistant commissioners at the Met, John Yates and Andy Hayman. It was a masterclass in forensic examination and the conclusion that these two powerful men buried the evidence of widespread wrongdoing that lay in Glen Mulcaire's notebooks, because of their relations with Murdoch's people, was unmistakable...'

John Yates squirmed while an email sent from a member of staff at the News of the World to the paper’s crime reporter, Lucy Panton was read out: "John Yates could be crucial here, really need exclusive splash line, so time to call in all those bottles of champagne,"

Yates's response that, "those perceived favours had never been called in," and dismissed it as a "turn of phrase," were clearly the best he could muster in the circumstances, but didn't seem to influence anyone.

The inquiry heard that Yates and Neil Wallis, the former deputy editor of the paper who has since been arrested in the new Scotland Yard investigation into phone hacking, had dined and drank together at London restaurants Scalini, Scotts and Bar Boulud at the Mandarin Oriental.

Mr Yates said he did not declare these meetings in the Scotland Yard hospitality register because they were private and not work-related, but they do appear in his diary. Well that's his story and he's sticking to it!

When I was a detective at New Scotland Yard, we were taught that journalists were among the most dangerous contacts any detective could expect to meet, and that they were to be treated with extreme caution. If you were a detective who was active and going to court regularly, you got accustomed to being approached by Fleet Street's 'finest' and asked for stories or comments. If you had any sense, you referred them to the Press Bureau, and made sure you had another officer present to witness the conversation.

If they were from the tabloid red-top press, or from the grubby 'Sundays', you tried as hard as possible not even to be seen having any conversation with them at all.

So why, with all this knowledge and hindsight, have some of the most senior policemen at the Yard been caught, literally with their noses in the Murdoch trough. What did they think was on the journo's agenda, more importantly, why did they put themselves in harm's way in such a manner, because they must have known that one day there would be an accounting, a pro quo for the quid, to use a mixed metaphor?

But there it is, they ate and drank at the expense of the most powerful man in the world of sleaze journalism, the guiding mind behind the editor of the aptly-named 'News of the Screws', and engaged in close relationships with executives from the Sun, that beacon of liberal reporting, 'whose readers don't give a flying fig who runs the country as long as she has got big tits', to quote the old joke about the country's newspaper reading habits.

Did they think that one day, those editors who signed off the expense accounts wouldn't call in the favours, possibly at a time of greatest embarrassment to the police? If they didn't, then they weren't very acute detectives. If they did, and ignored the fact, well.....!

Now, suddenly, an anonymous complainant has alerted the Attorney General's office to remarks made by DAC Sue Akers in her evidence to the Leveson Enquiry, suggesting that they might prejudice any future prosecution.

Dominic Grieve's office is reportedly examining the testimony given by Sue Akers to the Leveson Inquiry last month after receiving at least one complaint. She told the inquiry that the Sun newspaper had a "network of corrupted officials" across bodies such as the police and Ministry of Defence. One individual had received £80,000, while one journalist made payments to sources totalling more than £150,000 over a period of years, she said.

Here is evidence of a massive red herring being trailed across the track of the most important enquiry into public sector corruption ever in this country.First of all, no-one has yet been charged with any offence, and in any event, evidence to the enquiry is privileged. Even if anyone is later charged, is anyone going to seriously seek to argue that any potential juror was not aware that the whole enquiry might have been about alleged corruption in high places, and involving the 'News of the World' and the 'Sun' newspapers? I seriously doubt it. If it happens, the proper place to make this allegation will be at the trial of any putative defendant, and let the judge make the decision. I am confident it will fail!

No, this smear has been planted by someone with considerable experience of placing such disinformation, possibly an old Fleet Street hack, but just as easily by an unreconstructed cop or former cop, there are still a few of them hanging around the bars and restaurants where journos frequent, but the sad fact is the AG's office have to go through the fiction of saying that the AG will examine it, when, if he has any sense, he will wait for the enquiry to finish and Leveson's findings made public. Those findings will obscure any irrelevant arguments about Ms Akers' evidence, which was open, transparent, and possessed the ineluctable ring of truth!

We should be extremely grateful for the Leveson Enquiry. It has only just begun, I suspect, to deconstruct the extent of public sector corrupt practice that was allowed to develop between elements of the Murdoch press and some in the Metropolitan Police hierarchy. It is a truly shameful story, one which reflects no credit whatsoever on those officers who were seduced by the sleazy atmosphere of backhanders for leaks, expense-account meals in classy restaurants, or bottles of Champagne.

I am sure that I am not alone among my former colleagues who served the people of London in the Metropolitan Police to say that I am utterly disgusted by these allegations, and ashamed to discover that the reputation of the Force that I and so many others served, I hope, with dignity and honour, has been damaged so badly.

It is now up to DAC Sue Akers and her team to begin to restore that reputation, and that is why her work is already being undermined by some bastard who realises that she is getting very close to a greater truth than anyone involved in this sleazy exercise wants to have made public.

About Me

Having spent my career dealing with financial crime, both as a Met detective and as a legal consultant, I now spend my time working with financial institutions advising them on the best way to provide compliance with the plethora of conflicting regulations and laws designed to prevent and forestall money laundering - whatever that might be! This blog aims to provide a venue for discussion on these and aligned issues, because most of these subjects are so surrounded by disinformation and downright intellectual dishonesty, an alternative mouthpiece is predicated. Please share your views with what is published here from time to time!